Horizon Bancorp Announces 2014 Earnings

(NASDAQ:HBNC) – Horizon Bancorp today announced its unaudited financial results for the three and twelve-month periods ended December 31, 2014.

SUMMARY:

Assets surpassed $2.0 billion during 2014, ending the year at $2.1 billion as of December 31, 2014.

Net income for the year ending December 31, 2014 was $18.1 million or $1.90 diluted earnings per share.

Fourth quarter 2014 net income was $4.9 million or $.51 diluted earnings per share.

Total loans, excluding mortgage warehouse loans, increased 28.9% or $281.6 million during the year ended December 31, 2014.

The quarterly dividend was increased twice during the year ended December 31, 2014 from 11 cents to 13 cents in the second quarter and to 14 cents in the fourth quarter.

Return on average assets was 0.96% for the fourth quarter of 2014 and 0.93% for the year ending December 31, 2014.

Return on average common equity was 10.72% for the fourth quarter of 2014 and 10.60% for the year ending December 31, 2014.

Non-performing loans to total loans as of December 31, 2014 were 1.62% compared to 1.70% as of December 31, 2013.

Substandard loans totaled $27.7 million as of December 31, 2014, a decrease of $7.1 million from $34.7 million as of December 31, 2013.

Horizon’s full-service Carmel, Indiana office is expected to open in February of 2015.

Craig M. Dwight, Chairman and CEO, commented: “I am pleased to announce Horizon’s 2014 results, a year in which tremendous progress was made across the company. Headlining the year is the growth we achieved throughout the loan portfolio and the successful integration of the Summit Community Bank (“Summit”) acquisition in East Lansing, Michigan. All loan product types experienced significant growth during the year, allowing us to combat industry-wide net interest margin pressure. Additionally, the increase in assets from both organic loan growth and the Summit acquisition enabled us to spread operating costs across a larger and more diversified revenue stream.”

Dwight continued, “Excluding one-time expenses related to the Summit acquisition, the decrease in income from acquisition-related purchase accounting adjustments and gains on the sale of investment securities, Horizon’s net income and diluted earnings per share increased by 6.4% and 3.0%, respectively, for the year ended December 31, 2014 compared to the previous year. This increase is a notable accomplishment given the lower mortgage volume and poor weather conditions which decreased net income and earnings per share during the first quarter of 2014. The increase in core net income and diluted earnings per share illustrate the incremental operating leverage Horizon achieved through our strategic growth initiative. We believe our investments in technology, new markets, and talented employees have created a solid base to maintain this momentum into 2015.”

Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share

(Dollar Amounts in Thousands Except per Share Data)

Three Months Ended

Twelve Months Ended

December 31

December 31

2014

2013

2014

2013

(Unaudited)

(Unaudited)

Non-GAAP Reconciliation of Net Income

Net income as reported

$

4,948

$

4,115

$

18,101

$

19,876

Summit expenses

-

–

1,335

–

Tax effect

-

–

(467

)

–

Net income excluding Summit expenses

$

4,948

$

4,115

$

18,969

$

19,876

Acquisition related purchase accounting adjustments (“PAUs”)

(719

)

(850

)

(2,745

)

(6,294

)

Tax effect

252

298

961

2,203

Net income excluding Summit expenses and PAUs

$

4,481

3,563

$

17,185

$

15,785

Gain on sale of investment securities

-

–

(988

)

(374

)

Tax effect

-

–

346

131

Net income excluding gain on sale of investment securities

$

4,481

$

3,563

$

16,543

$

15,542

Non-GAAP Reconciliation of Diluted Earnings per Share

Diluted earnings per share as reported

$

0.51

$

0.45

$

1.90

$

2.17

Summit expenses

-

–

0.14

–

Tax effect

-

–

(0.05

)

–

Diluted earnings per share excluding Summit expenses

$

0.51

$

0.45

$

1.99

$

2.17

Acquisition related PAUs

(0.07

)

(0.09

)

(0.29

)

(0.70

)

Tax effect

0.03

0.03

0.10

0.24

Diluted earnings per share excluding Summit expenses and PAUs

$

0.46

$

0.39

$

1.80

$

1.71

Gain on sale of investment securities

-

–

(0.10

)

(0.04

)

Tax effect

-

–

0.04

0.01

Net income excluding gain on sale of investment securities

$

0.46

$

0.39

$

1.74

$

1.69

The following tables present the amount and growth rate of loans by product type for the three and twelve months ended December 31, 2014.

Loan Growth by Type

Three Months Ended December 31, 2014

(Dollars in Thousands)

Annualized

December 31

September 30

Amount

Percent

Percent

2014

2014

Change

Change

Change

(Unaudited)

(Unaudited)

Commercial loans

$

674,314

$

677,349

$

(3,035

)

-0.4

%

-1.8

%

Residential mortgage loans

254,625

251,739

2,886

1.1

%

4.5

%

Consumer loans

320,459

308,800

11,659

3.8

%

15.0

%

Held for sale loans

6,143

4,167

1,976

47.4

%

188.1

%

Subtotal

1,255,541

1,242,055

13,486

1.1

%

4.3

%

Mortgage warehouse loans

129,156

105,133

24,023

22.9

%

90.7

%

Total loans

$

1,384,697

$

1,347,188

$

37,509

2.8

%

11.0

%

Loan Growth by Type

Twelve Months Ended December 31, 2014

(Dollars in Thousands)

Annualized

December 31

December 31

Amount

Percent

Percent

2014

2013

Change

Change

Change

(Unaudited)

Commercial loans

$

674,314

$

505,189

$

169,125

33.5

%

33.5

%

Residential mortgage loans

254,625

185,958

68,667

36.9

%

36.9

%

Consumer loans

320,459

279,525

40,934

14.6

%

14.6

%

Held for sale loans

6,143

3,281

2,862

87.2

%

87.2

%

Subtotal

1,255,541

973,953

281,588

28.9

%

28.9

%

Mortgage warehouse loans

129,156

98,156

31,000

31.6

%

31.6

%

Total loans

$

1,384,697

$

1,072,109

$

312,588

29.2

%

29.2

%

“The resiliency of our net interest margin throughout the year illustrates the positive impact our loan growth has made,” Dwight continued. “Horizon’s core net interest margin, excluding income from acquisition-related purchase accounting adjustments, increased from 3.39% in the fourth quarter of 2013 to 3.48% in the fourth quarter of 2014. For the year ended December 31, 2014, the net interest margin decreased only 10 basis points to 3.47% in an environment with margin pressure persisting throughout the banking industry.”

Non-GAAP Reconciliation of Net Interest Margin

(Dollar Amounts in Thousands)

Three Months Ended

Twelve Months Ended

December 31

September 30

December 31

December 31

2014

2014

2013

2014

2013

(Unaudited)

(Unaudited)

(Unaudited)

Net Interest Margin As Reported

Net interest income

$

16,523

$

16,400

$

14,129

$

62,983

$

61,383

Average interest-earning assets

1,865,750

1,877,066

1,616,461

1,794,263

1,617,028

Net interest income as a percent of average interest-earning assets

3.64

%

3.59

%

3.60

%

3.62

%

3.96

%

Impact of Acquisitions

Interest income from acquisition-related purchase accounting

adjustments

$

(719

)

$

(438

)

$

(850

)

$

(2,745

)

$

(6,294

)

Net Interest Margin Excluding Impact of Acquisitions

Net interest income

$

15,804

$

15,962

$

13,279

$

60,238

$

55,089

Average interest-earning assets

1,865,750

1,877,066

1,616,461

1,794,263

1,617,028

Net interest income as a percent of average interest-earning assets

3.49

%

3.50

%

3.39

%

3.47

%

3.57

%

Dwight commented on the increase in provision for loan losses in the fourth quarter and for the year ending December 31, 2014 compared to the same periods of the previous year. “This increase reflects loan growth as well as a loan loss reserve to loan ratio in-line with current credit conditions. Non-performing loans increased $2.7 million during the fourth quarter; however, total substandard loans decreased by $7.3 million from $35.0 million as of September 30, 2014 to $27.7 million as of December 31, 2014. The increase in non-performing loans was due to one commercial real estate loan totaling $5.4 million that was moved to non-accrual status during the fourth quarter of 2014. Credit conditions continue to improve across the portfolio.”

Dwight concluded, “Horizon’s four key revenue sources – business banking, retail banking, residential mortgage lending and wealth management – all made positive contributions to our 2014 results. We remain focused on continuing this trend in 2015 in an effort to increase profitability and build shareholder value.”

Income Statement Highlights

Net income for the fourth quarter of 2014 was $4.9 million or $.51 diluted earnings per share compared to $4.1 million or $.45 diluted earnings per share in the fourth quarter of 2013. The increase in net income from the previous year reflects an increase in interest income primarily due to loan growth and an increase in non-interest income due to an increase in gain on sale of loans, interchange fees and fiduciary activities partially offset by an increase in the provision expense.

Net income for the year ended December 31, 2014 was $18.1 million or $1.90 diluted earnings per share compared to $19.9 million or $2.17 diluted earnings per share for the year ended December 31, 2013. The decrease in net income compared to the previous year was due to $1.3 million in expenses related to the Summit acquisition in 2014 and a decrease of $3.5 million in income from acquisition-related purchase accounting adjustments partially offset by an increase of $614,000 in income from the gain on sale of investment securities. Excluding these non-core items, net income for the year ending December 31, 2014 increased $998,000 or 6.4% to $16.5 million compared to $15.5 million in the previous year.

Horizon’s net interest margin was 3.64% during the fourth quarter of 2014, up from 3.59% for the prior quarter and 3.60% for same period of 2013. The increase in net interest margin compared to the prior quarter was due to acquisition-related purchase accounting adjustments and lower funding costs, and the increase compared to the same period of 2013 was primarily due to loan growth. Excluding purchase accounting adjustments related to the 2012 Heartland Bancshares, Inc. and the 2014 Summit acquisitions, the margin would have been 3.48% for the fourth quarter of 2014 compared to 3.50% for the prior quarter and 3.39% for the same period of the prior year. Interest income from acquisition-related purchase accounting adjustments was $719,000, $438,000, and $850,000 for the three months ended December 31, 2014, September 30, 2014 and December 31, 2013, respectively.

Horizon’s net interest margin was 3.62% for the year ending December 31, 2014, down from 3.96% for the year ending December 31, 2013. Excluding interest income from acquisition-related purchase accounting adjustments, the margin would have been 3.47% for the twelve months ending December 31, 2014 compared to 3.57% for same period of 2013. Interest income from acquisition-related purchase accounting adjustments was $2.7 million and $6.3 million for the twelve months ended December 31, 2014 and December 31, 2013, respectively.

Residential mortgage lending activity during the fourth quarter of 2014 generated $2.3 million in income from the gain on sale of mortgage loans, an increase of $1.1 million from the fourth quarter of 2013. Total origination volume in the fourth quarter of 2014, including loans placed into portfolio, totaled $96.0 million, representing an increase of 36.4% from the fourth quarter of 2013 of $70.4 million. Purchase money mortgage originations during the fourth quarter of 2014 represented 67.6% of total originations compared to 77.6% of originations during the previous quarter and 75.6% during the fourth quarter of 2013.

Lending Activity

Total loans increased $312.6 million from $1.1 billion as of December 31, 2013 to $1.4 billion as of December 31, 2014 as mortgage warehouse loans increased by $31.0 million, residential mortgage loans increased by $68.7 million and consumer loans increased by $40.9 million. Commercial loans increased $169.1 million or 33.5% from $505.2 million at December 31, 2013 to $674.3 million at December 31, 2014. Total loans increased 2.8% in the fourth quarter of 2014 with positive growth contributions from both the residential mortgage and consumer loan portfolios. Commercial loans decreased 0.4% over the linked quarter due to unanticipated payoffs during the quarter; however, the pipeline going into 2015 remains solid.

Total loan balances in the Kalamazoo and Indianapolis markets continued to grow during 2014 to $142.2 million and $123.4 million, respectively, as of December 31, 2014. Kalamazoo’s aggregate loan balances increased $28.4 million or 24.9%, and Indianapolis’ aggregate loan balances increased $50.8 million or 69.9% compared to December 31, 2013.

The provision for loan losses was $978,000 for the fourth quarter of 2014 compared to a negative provision of $997,000 for the same period of 2013. The higher provision for loan losses for the fourth quarter of 2014 compared to the same period of 2013 was due to loan growth as well as a specific reserve of $560,000 placed on one commercial real estate loan that was moved to non-accrual status during the fourth quarter of 2014. The provision for loan losses was $3.1 million for the year ended December 31, 2014 compared to $1.9 million for the same period of 2013. The higher provision for loan losses for the year ending December 31, 2014 compared to the same period of 2013 was due to loan growth as well as $1.0 million in charge-off expense related to one commercial credit in the third quarter of 2014 and a specific reserve of $560,000 placed on one commercial real estate loan that was moved to non-accrual status during the fourth quarter of 2014.

The ratio of the allowance for loan losses to total loans decreased to 1.19% as of December 31, 2014 from 1.49% as of December 31, 2013 due to an increase in total loans from both organic growth and the Summit acquisition, partially offset by an increase in the allowance for loan losses from $16.0 million as of December 31, 2013 to $16.5 million as of December 31, 2014. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 1.29% as of December 31, 2014.

Non-performing loans totaled $22.4 million as of December 31, 2014, up from $18.3 million as of December 31, 2013. Compared to December 31, 2013, non-performing commercial loans and consumer loans increased by $4.4 million and $32,000, respectively, partially offset by a decrease of $252,000 in non-performing real estate loans. The increase in non-performing commercial loans was due to the Summit acquisition as well as a commercial real estate loan totaling $5.4 million that was moved to non-accrual status in the fourth quarter of 2014. As a percentage of total loans, non-performing loans were 1.62% at December 31, 2014, down 8 basis points from 1.70% at December 31, 2013. At December 31, 2014, loans acquired in the Summit acquisition represented $1.2 million in non-performing, $2.3 million in substandard and $173,000 in delinquent loans.

Expense Management

Total non-interest expense was $3.5 million higher in 2014 compared to 2013 and $62,000 lower in the fourth quarter of 2014 compared to the fourth quarter of 2013. The increase in 2014 compared to the previous year was primarily due to an increase in salaries, occupancy, data processing and outside services and consultant costs. In addition, some of the increase in 2014 compared to 2013 was related to the Summit acquisition.

Use of Non-GAAP Financial Measures

Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non-GAAP financial measures of the net interest margin excluding the impact of acquisition-related purchase accounting adjustments and net income and diluted earnings per share excluding the impact of one-time costs related to the Summit acquisition, acquisition-related purchase accounting adjustments and gains on the sale of investment securities. Horizon believes that these non-GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to the purchase accounting impacts and one-time costs of acquisitions and non-core items, although these measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure.

About Horizon

Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern and Central Indiana and Southwest and Central Michigan through its commercial banking subsidiary Horizon Bank, NA. Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached online at www.horizonbank.com. Its common stock is traded on the NASDAQ Global Market under the symbol HBNC.

Forward Looking Statements

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon. For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in its Form 10-K. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

HORIZON BANCORP

Financial Highlights

(Dollars in thousands except share and per share data and ratios, unaudited)

December 31

September 30

June 30

March 31

December 31

2014

2014

2014

2013

2013

Balance sheet:

Total assets

$

2,076,922

$

2,037,045

$

2,073,251

$

1,806,583

$

1,758,276

Investment securities

489,531

495,941

537,618

529,340

518,501

Commercial loans

674,314

677,349

648,202

528,635

505,189

Mortgage warehouse loans

129,156

105,133

140,896

102,146

98,156

Residential mortgage loans

254,625

251,739

235,523

189,893

185,958

Consumer loans

320,459

308,800

296,873

280,120

279,525

Earning assets

1,885,576

1,860,041

1,882,724

1,649,653

1,604,794

Non-interest bearing deposit accounts

267,667

278,527

270,023

238,499

231,096

Interest bearing transaction accounts

930,582

881,299

919,024

840,258

779,966

Time deposits

284,070

289,837

310,056

276,814

280,458

Borrowings

351,198

350,113

340,201

236,043

256,296

Subordinated debentures

32,642

32,603

32,564

32,525

32,486

Common stockholders’ equity

181,914

177,280

174,836

157,283

152,020

Total stockholders’ equity

194,414

189,780

187,336

169,783

164,520

Income statement:

Three months ended

Net interest income

$

16,523

$

16,400

$

16,788

$

13,272

$

14,129

Provision for loan losses

978

1,741

339

–

(997

)

Non-interest income

6,738

7,390

6,627

5,522

5,687

Non-interest expenses

15,671

15,353

16,408

14,514

15,610

Income tax expense

1,664

1,738

1,890

863

1,088

Net income

4,948

4,958

4,778

3,417

4,115

Preferred stock dividend

(31

)

(40

)

(31

)

(31

)

(63

)

Net income available to common shareholders

$

4,917

$

4,918

$

4,747

$

3,386

$

4,052

Per share data:

Basic earnings per share

$

0.53

$

0.53

$

0.52

$

0.39

$

0.47

Diluted earnings per share

0.51

0.51

0.50

0.38

0.45

Cash dividends declared per common share

0.14

0.13

0.13

0.11

0.11

Book value per common share

19.75

19.25

19.00

18.22

17.64

Tangible book value per common share

16.26

15.75

15.47

15.52

14.97

Market value – high

26.73

23.67

22.58

24.91

26.09

Market value – low

$

22.83

$

20.65

$

19.57

$

20.27

$

21.07

Weighted average shares outstanding – Basic

9,212,156

9,208,707

9,182,986

8,630,966

8,623,360

Weighted average shares outstanding – Diluted

9,628,240

9,588,332

9,560,939

9,021,786

9,020,289

Key ratios:

Return on average assets

0.96

%

0.96

%

0.97

%

0.79

%

0.93

%

Return on average common stockholders’ equity

10.72

10.95

11.82

8.81

10.44

Net interest margin

3.64

3.59

3.78

3.48

3.60

Loan loss reserve to total loans

1.19

1.20

1.18

1.46

1.49

Non-performing loans to loans

1.62

1.47

1.41

1.59

1.70

Average equity to average assets

9.56

9.33

8.79

9.65

9.46

Bank only capital ratios:

Tier 1 capital to average assets

8.85

8.63

8.78

9.11

9.18

Tier 1 capital to risk weighted assets

12.00

12.13

11.47

12.87

13.42

Total capital to risk weighted assets

13.12

13.26

12.53

14.12

14.67

Loan data:

Substandard loans

$

27,661

$

35,023

$

35,495

$

32,648

$

34,721

30 to 89 days delinquent

5,082

3,310

3,671

2,613

3,452

90 days and greater delinquent – accruing interest

$

115

$

62

$

42

$

202

$

48

Trouble debt restructures – accruing interest

4,372

5,838

5,614

4,997

5,053

Trouble debt restructures – non-accrual

2,643

3,061

3,178

3,662

3,427

Non-accrual loans

15,312

10,828

9,844

8,775

9,749

Total non-performing loans

$

22,442

$

19,789

$

18,678

$

17,636

$

18,277

HORIZON BANCORP

Financial Highlights

(Dollars in thousands except share and per share data and ratios, Unaudited)

December 31

December 31

2014

2013

Balance sheet:

Total assets

$

2,076,922

$

1,758,276

Investment securities

489,531

518,501

Commercial loans

674,314

505,189

Mortgage warehouse loans

129,156

98,156

Residential mortgage loans

254,625

185,958

Consumer loans

320,459

279,525

Earning assets

1,885,576

1,604,794

Non-interest bearing deposit accounts

267,667

231,096

Interest bearing transaction accounts

930,582

790,444

Time deposits

284,070

269,980

Borrowings

351,198

256,296

Subordinated debentures

32,642

32,486

Common stockholders’ equity

181,914

152,020

Total stockholders’ equity

194,414

164,520

Income statement:

Twelve Months Ended

Net interest income

$

62,983

$

61,383

Provision for loan losses

3,058

1,920

Non-interest income

26,277

25,906

Non-interest expenses

61,946

58,445

Income tax expense

6,155

7,048

Net income

18,101

19,876

Preferred stock dividend

(133

)

(370

)

Net income available to common shareholders

$

17,968

$

19,506

Per share data:

Basic earnings per share

$

1.98

$

2.26

Diluted earnings per share

1.90

2.17

Cash dividends declared per common share

0.51

0.42

Book value per common share

19.75

17.64

Tangible book value per common share

16.26

14.97

Market value – high

26.73

26.09

Market value – low

$

19.57

$

18.97

Weighted average shares outstanding – Basic

9,060,702

8,619,330

Weighted average shares outstanding – Diluted

9,454,125

9,000,963

Key ratios:

Return on average assets

0.93

%

1.13

%

Return on average common stockholders’ equity

10.60

12.86

Net interest margin

3.62

3.96

Loan loss reserve to total loans

1.19

1.49

Non-performing loans to loans

1.62

1.70

Average equity to average assets

9.33

9.34

Bank only capital ratios:

Tier 1 capital to average assets

8.85

9.18

Tier 1 capital to risk weighted assets

12.00

13.42

Total capital to risk weighted assets

13.12

14.67

Loan data:

Substandard loans

$

27,661

$

34,721

30 to 89 days delinquent

5,082

3,452

90 days and greater delinquent – accruing interest

$

115

$

48

Trouble debt restructures – accruing interest

4,372

5,053

Trouble debt restructures – non-accrual

2,643

3,427

Non-accrual loans

15,312

9,749

Total non-performing loans

$

22,442

$

18,277

HORIZON BANCORP

Allocation of the Allowance for Loan and Lease Losses

(Dollars in Thousands, Unaudited)

December 31

September 30

June 30

March 31

December 31

2014

2014

2014

2014

2013

Commercial

$

7,881

$

7,515

$

6,958

$

7,236

$

6,663

Real estate

3,180

3,304

2,367

2,813

3,462

Mortgage warehousing

1,272

1,300

1,559

1,665

1,638

Consumer

4,168

4,041

4,776

4,388

4,229

Unallocated

-

–

–

–

–

Total

$

16,501

$

16,160

$

15,660

$

16,102

$

15,992

Net Charge-offs (Recoveries)

(Dollars in Thousands, Unaudited)

Three months ended

December 31

September 30

June 30

March 31

December 31

2014

2014

2014

2014

2013

Commercial

$

199

$

1,006

$

185

$

(361

)

$

214

Real estate

101

19

169

18

350

Mortgage warehousing

-

–

–

–

–

Consumer

336

217

426

233

295

Total

$

636

$

1,242

$

780

$

(110

)

$

859

Total Non-performing Loans

(Dollars in Thousands, Unaudited)

December 31

September 30

June 30

March 31

December 31

2014

2014

2014

2014

2013

Commercial

$

11,855

$

9,323

$

8,243

$

7,313

$

7,471

Real estate

5,894

6,312

6,672

6,357

6,146

Mortgage warehousing

-

–

–

–

–

Consumer

4,693

4,154

3,763

3,966

4,660

Total

$

22,442

$

19,789

$

18,678

$

17,636

$

18,277

Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)

December 31

September 30

June 30

March 31

December 31

2014

2014

2014

2014

2013

Commercial

$

411

$

376

$

452

$

812

$

830

Real estate

636

875

752

867

1,277

Mortgage warehousing

-

–

–

–

–

Consumer

154

3

23

39

14

Total

$

1,201

$

1,254

$

1,227

$

1,718

$

2,121

HORIZON BANCORP AND SUBSIDIARIES

Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

Three Months Ended

Three Months Ended

December 31, 2014

December 31, 2013

Average

Average

Average

Average

Balance

Interest

Rate

Balance

Interest

Rate

ASSETS

Interest-earning assets

Federal funds sold

$

5,317

$

2

0.15

%

$

5,462

$

3

0.22

%

Interest-earning deposits

8,689

3

0.14

%

6,337

4

0.25

%

Investment securities – taxable

362,550

2,215

2.42

%

389,481

2,281

2.32

%

Investment securities – non-taxable (1)

145,705

1,098

4.46

%

147,184

1,111

4.40

%

Loans receivable (2)(3)

1,343,489

16,447

4.87

%

1,067,997

14,040

5.22

%

Total interest-earning assets (1)

1,865,750

19,765

4.33

%

1,616,461

17,439

4.41

%

Noninterest-earning assets

Cash and due from banks

28,451

24,416

Allowance for loan losses

(16,094

)

(17,795

)

Other assets

156,992

136,256

$

2,035,099

$

1,759,338

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing liabilities

Interest-bearing deposits

$

1,216,920

$

1,273

0.42

%

$

1,096,241

$

1,352

0.49

%

Borrowings

303,390

1,463

1.91

%

221,882

1,452

2.60

%

Subordinated debentures

32,619

506

6.15

%

32,464

506

6.18

%

Total interest-bearing liabilities

1,552,929

3,242

0.83

%

1,350,587

3,310

0.97

%

Noninterest-bearing liabilities

Demand deposits

273,973

229,424

Accrued interest payable and

other liabilities

13,740

12,807

Shareholders’ equity

194,457

166,520

$

2,035,099

$

1,759,338

Net interest income/spread

$

16,523

3.50

%

$

14,129

3.44

%

Net interest income as a percent

of average interest earning assets (1)

3.64

%

3.60

%

(1)

Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.

(2)

Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.

(3)

Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.

HORIZON BANCORP AND SUBSIDIARIES

Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

Twelve Months Ended

Twelve Months Ended

December 31, 2014

December 31, 2013

Average

Average

Average

Average

Balance

Interest

Rate

Balance

Interest

Rate

ASSETS

Interest-earning assets

Federal funds sold

$

6,246

$

11

0.18

%

$

8,468

$

21

0.25

%

Interest-earning deposits

7,087

10

0.14

%

7,720

19

0.25

%

Investment securities – taxable

387,013

9,323

2.41

%

371,594

8,401

2.26

%

Investment securities – non-taxable (1)

146,407

4,426

4.32

%

136,584

4,216

4.98

%

Loans receivable (2)(3)

1,247,510

62,435

5.01

%

1,092,662

62,229

5.70

%

Total interest-earning assets (1)

1,794,263

76,205

4.36

%

1,617,028

74,886

4.80

%

Noninterest-earning assets

Cash and due from banks

27,168

24,548

Allowance for loan losses

(15,945

)

(18,677

)

Other assets

144,803

134,220

$

1,950,289

$

1,757,119

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing liabilities

Interest-bearing deposits

$

1,182,831

$

5,257

0.44

%

$

1,092,796

$

5,672

0.52

%

Borrowings

281,649

5,956

2.11

%

234,927

5,821

2.48

%

Subordinated debentures

32,561

2,009

6.17

%

32,406

2,010

6.20

%

Total interest-bearing liabilities

1,497,041

13,222

0.88

%

1,360,129

13,503

0.99

%

Noninterest-bearing liabilities

Demand deposits

258,523

219,323

Accrued interest payable and

other liabilities

12,776

13,534

Shareholders’ equity

181,949

164,133

$

1,950,289

$

1,757,119

Net interest income/spread

$

62,983

3.48

%

$

61,383

3.81

%

Net interest income as a percent

of average interest earning assets (1)

3.62

%

3.96

%

(1)

Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.

(2)

Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.

(3)

Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)

December 31

December 31

2014

2013

(Unaudited)

Assets

Cash and due from banks

$

43,476

$

31,721

Investment securities, available for sale

323,764

508,591

Investment securities, held to maturity (fair value of $169,904 and $9,910)

165,767

9,910

Loans held for sale

6,143

3,281

Loans, net of allowance for loan losses of $16,501 and $15,992

1,362,053

1,052,836

Premises and equipment, net

52,461

46,194

Federal Reserve and Federal Home Loan Bank stock

11,348

14,184

Goodwill

28,176

19,748

Other intangible assets

3,965

3,288

Interest receivable

8,246

7,501

Cash value life insurance

39,382

36,190

Other assets

32,141

24,832

Total assets

$

2,076,922

$

1,758,276

Liabilities

Deposits

Non-interest bearing

$

267,667

$

231,096

Interest bearing

1,214,652

1,060,424

Total deposits

1,482,319

1,291,520

Borrowings

351,198

256,296

Subordinated debentures

32,642

32,486

Interest payable

497

506

Other liabilities

15,852

12,948

Total liabilities

1,882,508

1,593,756

Commitments and contingent liabilities

Stockholders’ Equity

Preferred stock, Authorized, 1,000,000 shares

Series B shares $.01 par value, $1,000 liquidation value

Issued 12,500 shares

12,500

12,500

Common stock, no par value

Authorized, 22,500,000 shares

Issued, 9,278,916 and 8,706,971 shares

Outstanding, 9,213,036 and 8,630,966 shares

-

–

Additional paid-in capital

45,916

32,496

Retained earnings

134,477

121,253

Accumulated other comprehensive income (loss)

1,521

(1,729

)

Total stockholders’ equity

194,414

164,520

Total liabilities and stockholders’ equity

$

2,076,922

$

1,758,276

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)

Three Months Ended

Twelve Months Ended

December 31

December 31

2014

2013

2014

2013

(Unaudited)

(Unaudited)

Interest Income

Loans receivable

$

16,447

$

14,040

$

62,435

$

62,229

Investment securities

Taxable

2,220

2,288

9,344

8,441

Tax exempt

1,098

1,111

4,426

4,216

Total interest income

19,765

17,439

76,205

74,886

Interest Expense

Deposits

1,273

1,352

5,257

5,672

Borrowed funds

1,463

1,452

5,956

5,821

Subordinated debentures

506

506

2,009

2,010

Total interest expense

3,242

3,310

13,222

13,503

Net Interest Income

16,523

14,129

62,983

61,383

Provision for loan losses

978

(997

)

3,058

1,920

Net Interest Income after Provision for Loan Losses

15,545

15,126

59,925

59,463

Non-interest Income

Service charges on deposit accounts

1,048

1,005

4,085

3,989

Wire transfer fees

149

135

557

697

Interchange fees

1,213

1,007

4,649

4,056

Fiduciary activities

1,360

1,197

4,738

4,337

Gain on sale of investment securities (includes $0 for the three months

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